Thomson Buys Nelson Information, Will Use Internet Distribution Capability

BOSTON--Thomson Financial Services' acquisition of Nelson Information from Primedia puts a new spin on the rapidly evolving research distribution business. No price was disclosed for the deal.

Until the transaction had been announced, Nelson's was just one of a handful of competitors using Internet technology to make a run at the dominant position enjoyed for years by Thomson's First Call unit. (ITT, February 20). Indeed, most of the third-party distributors, First Call included, have been aggressively taking advantage of the Internet (ITT, October 17, 1997). Last month, another competitor, Primark's I/B/E/S unit, also launched an Internet service (ITT, April 3).

But First Call has always been a costly service, and its competitors looked at the Internet as a way to cut into its market share.

"A lot of buy-side managers resent having to pay a middleman to get reports they always got for free," explains one analyst requesting anonymity.

"It's very interesting news," says Simon Asplen-Taylor, a former analyst for UBS. "Nelson's red book is a great product for seeing which analyst follows which stock. At the same time Nelson's is putting out an electronic distribution product which Thomson will probably integrate."

Asplen-Taylor left UBS to head London-based technology-startup Zebra City, which is developing systems for Thomson's First Call (see related article, this issue).

"It means research is suddenly getting a lot of attention," he says. "It hasn't had any for a long time, and now it's getting a ridiculous amount."

In April, Thomson's consolidated its research delivery businesses, including First Call and Investext into one group headed by Tom Moore, who had been Investext's president. At the same time, First Call CEO Bruce Fador left the company to join a Boston-based start-up World street. David Irving was named the new president for Investext.

The Nelson's acquisition, and its Web distribution technology, put Thomson in a position to exploit last month's consolidation of its research business. First Call distributes brokerage research to the primary, real-time market of portfolio managers and buy-side analysts. Investext uses a separate network to distribute much of the same research to a secondary market of corporate executives and merger and acquisition specialists at investment banks.

The Nelsons.com Web site targeted both these markets with one service and allowed brokers to price their research in one-to-one arrangements with each of their customers.

Officials at Multex, a Thomson competitor with financial backing from Merrill Lynch and some venture capital firms, had no comment.

Ed Keon, a senior vice president at Primark's I/B/E/S division, says he doesn't expect any impact on his company from the acquisition. I/B/E/S grew 40 per cent last year, and it remains on track for the same in 1998.

Primedia, which is best known for publishing consumer magazines like New York and Seven teen, had been through a restructuring of its operations last year, but that was seen as largely completed by the first quarter. Nelson was part of the business services division and accounted for no more than 1 per cent of the annual revenue for the New York publishing company, which was founded by the leveraged buy-out specialists, Kohlberg Kravis Roberts.

Some analysts believe the acquisition will roil the market.

One says: "We'll have to see what Thomson does. Nelson is taking advantage of no-cost paradigm. If you're sitting in the middle you're in danger, and that's exactly where I/B/E/S is. Could they put them out of business over night? Probably not. But if I were them I'd be looking closely at what to do."

"It's a great fit for Thomson," say Carolyn Ing, a Boston money manager who had followed the brokerage research business for The Tower Group. "Content-wise, Nelson's guides are the standard reference sources for the investment management and securities industry, which of course folds right into Thomson's strength. Nelson also brings Thomson three steps ahead of where they were previously on the technology distribution side."